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Transferring ISAs Q&A

ISAs are a great way to grow your savings tax-free.

But not all cash ISAs pay great interest rates, and not all ISA investments provide good returns.

Some cash ISAs, for example, pay as little as 0.10%, even though the market-leading instant access accounts pay more than 10 times that amount.

The good news is that you can transfer your ISA funds if you are unhappy with the returns offered by your stocks and shares ISA, or the interest paid by your cash ISA.

You can also move from cash into equities, or from equities into cash.

But beware: there are strict rules to follow if you want to avoid losing the tax breaks you have built up.

Here, we answer your questions so that you can get the best possible deal, without losing any tax-free benefits.

"Beware: there are strict rules to follow if you want to avoid losing the tax breaks you have built up..."

What is an ISA transfer?

An ISA transfer means moving your savings from say, one cash ISA account to another, or from a cash account to a stocks and shares one.

Crucially, however, it does not involve you physically removing the funds from one bank or investment company and investing them with another.

To protect the tax-free status of your money, you must instead arrange a transfer with the provider you want to switch to BEFORE closing your existing account.

This is the case both for funds built up in previous tax years and money invested since April 2016.

Why should I transfer my ISA?

Many market-leading cash ISAs and outperforming investment funds become much less competitive with time.

So even if you do your research and choose a great ISA, you may still need to transfer to avoid missing out on the best returns a year or so down the line.

You have the right to shop around for the best possible interest rate (or risk reward ratio when it comes to equities, for example), so you might as well use it. If you have several ISAs you may also want to transfer all of your money to one place.

Can I always transfer my ISA?

You can move between cash and stocks and shares ISAs as you wish. 

But while past years' ISA money can be split between different providers, cash ISAs set up in the current tax year must also be moved whole. 

As not all cash ISAs accept transfers in, especially if you already have an ISA with the same provider, it is also important to check this when making your choice.

Other limitations include that you can only open one new cash ISA per tax year (which runs from April 6 to the following April 5).

Some cash ISAs – particularly those with fixed rates – also impose a penalty if you transfer out within a set period.

Are there any disadvantages to ISA transfers?

You may have to pay a penalty for switching away from a cash ISA account, particularly if you have signed up for a fixed rate of interest. 

If this is the case, you will need to work out if the benefits of transferring to a new provider outweigh the cost of the penalty – or whether you would be better off waiting to switch.

When switching stocks and shares ISAs, there are also costs to take into account.

How does an ISA transfer work?

Once you have chosen the ISA provider you want to move to, the first step is to open a new account.  

It should then provide you with a short ISA transfer form to complete.

And that’s it. Your new provider will take care of everything else, and the transfer should be complete within two weeks for cash ISAs, or slightly longer for stocks and shares accounts.

How do I choose where to transfer my ISA?

The aim of an ISA transfer is to make your money work harder by improving the interest rate or return you receive. 

Before making a transfer, it's a good idea to scour the whole market for the best possible deals that accept transfers in. Start by visiting our cash ISA channel and be sure to click on 'See all deals'

New ISA flexibility

It’s worth noting that ISAs have become much more flexible since April 6 2016. If you hold cash in an either an investment, cash, or Innovative Finance ISA, you can take this cash out of your account and put it back in within the same tax year without this affecting your annual allowance. Not all ISA providers may offer this flexibility, so check with yours before withdrawing any money.  

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